By Chris Fournier July 17 (Bloomberg) -- Canada’s dollar posted the first weekly gain in almost two months as commodities rose amid increasing investor appetite for higher-yielding assets and central-bank surveys highlighted improving economic conditions. The currency’s rise was also helped by deals for Canadian companies, traders said. The loonie, as it’s known, appreciated 4.4 percent, the first gain since the five days to May 29 and the biggest since the week ended May 22. Oil, Canada’s biggest export, climbed more than $3 a barrel. Raw materials account for more than half of the country’s export revenue. “This is really a trend away from the U.S. dollar and yen in favor of risk assets and commodities and, by extension, commodity currencies,” said Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto. Canada’s currency rose 0.3 percent to C$1.1139 per U.S. dollar at 4:58 p.m. in Toronto, from C$1.1171 yesterday. It closed at C$1.1638 on July 10. One Canadian dollar buys 89.78 U.S. cents. The loonie gained 6.3 percent against the yen for the week. The market experienced “some flows from mergers and acquisitions that have been Canadian-dollar friendly,” National Bank’s Spitz said. He declined to elaborate. “Two large transactions are going through the market,” said Matthew Kassel, director of proprietary trading at ING Financial Markets LLC in New York. “Everyone who was a buyer of U.S. dollars against Canadian dollars has stepped aside.” Kassel wouldn’t say what the deals were, or whether he was involved in the trading. Top Performer Recent deals include an agreement in March by Wuhan Iron & Steel Group, the third-largest Chinese steelmaker, to buy 19.9 percent of Toronto-based Consolidated Thomson Iron Mines Ltd. for $240 million. The transaction is scheduled to close July 20. China Petrochemical Corp., China’s second-largest oil company, agreed last month to buy Geneva-based Addax Petroleum Corp. for C$8.3 billion ($7.2 billion). Addax has its primary listing on the Toronto Stock Exchange. Among the 16 most-traded currencies tracked by Bloomberg, Canada’s performed best so far this week and this month against the greenback as commodities rose and corporate earnings beat analysts’ expectations. The currencies of Australia and New Zealand, Canada’s commodity-linked peers, rose 3 percent and 2.7 percent this week, respectively. The U.S. dollar and the yen were the worst performers as investors ventured into higher yielding-assets. Crude oil for August delivery increased 2.5 percent today to $63.57 a barrel in New York. It gained 6.1 percent this week, from $59.89 a barrel on July 10. Copper for September delivery climbed 9.4 percent this week, and the Reuters/Jefferies CRB Index of 19 raw materials advanced every day this week for a five-day gain of 4.9 percent. Business Optimism Earnings beat estimates by an average of 16 percent for the 38 companies in the Standard & Poor’s 500 Index that released results since July 8. Analysts estimate that profits fell an average 35 percent in the second quarter and will decrease 21 percent from July through September, according to data compiled by Bloomberg. Bank of Canada surveys released July 13 showed Canadian businesses are the most optimistic about their future sales prospects in almost a decade and that obtaining new loans is becoming less difficult. The central bank meets on July 21 to determine borrowing costs, after halving the key overnight interest rate in April to 0.25 percent, a record low. Canada’s government debt lost investors 2.4 percent so far in 2009, according to a Merrill Lynch & Co. index. The 10-year note’s yield climbed six basis points today, or 0.06 percentage point, to 3.49 percent. The price of the 3.75 percent security maturing in June 2019 dropped 54 cents to C$102.18. The loonie will weaken to C$1.14 by October and C$1.15 by January, according to the median forecast of 34 economists and analysts surveyed by Bloomberg News. To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net

Source